Everyday Health (EVDY) is looking so pale that it may be secretly looking up its symptoms on rival website, WebMD.
Everyday had never exactly been the picture of health. The WebMD wannabe had racked up a $2.38 per share net loss when it went public in February 2014. The company made money in 2014 but slumped back to a $12 million loss or -$0.36 last year.
Here's how the prognosis looks to TheStreetSweeper:
*1. Google Changes
Ten years ago, WebMD was part of Google's experimental program to help improve health search results.
The experiment worked and WebMD became a popular site for consumers to diagnose their own illnesses. The Mayo Clinic developed its own well-recognized symptom checker as well.
Everyday Health and other content aggregators rushed in and began offering their solutions. The problem is that they depend heavily on Google searches because, unlike WebMD and Mayo, they aren't recognized brands.
Now a decade later Google wants to keep eyeballs glued to its own pages rather than rushing them away to the content aggregators.
Google began this effort in June, when it rolled out a new symptom search for Androids and Apple phones or tablets.
So Google remains firmly ahead of the game as more and more people switch from PC to smartphone searches.
*2. Looming: More Risk
Everyday Health and other content providers are dependent on Google, the No. 1 destination for health information: Get strong Google results or die.
Other risks posed by Google's new symptom search, include:
*The app is initially available in English in the U.S. with plans to expand over the months into other languages, countries and enhancements, thus introducing future challenges to Everyday Health.
*Google's symptom search eliminates the need to cross-check symptoms on WebMD or Everyday Health because cross-checking can be accomplished on Google.
*Google is partnering on symptom search with institutions such as Harvard Medical School and the Mayo Clinic. Doctors are helping with Everyday Health's symptom lookup but most content is by writers who aren't doctors. Examples include:
(Source: Everyday Health)
*3. Mobile App Downloads Decline
Mobile is of growing importance to Everyday Health, where mobile accounts for 75% of total traffic.
Everyday's 2014 mobile revenues grew 82% to $68 million. But mobile has slowed drastically, with 2015 revenues hitting only $73 million or just 8% growth. However the company stopped breaking out mobile revenue after the third quarter of 2015, so we assume revenue growth has further declined.
The chief reason for the mobile disappointment is likely because iPhone users show far, far more interest in WebMD than Everyday. Everyday Health download rankings frequently fall below 1,500 in the health and fitness category:
(Source: App Annie)
That compares with WebMD's app which consistently ranks around the top 73 downloads:
(Source: App Annie)
An insidious threat has already taken a toll and is set to virtually kill the ability of sites like Everyday Health to make money from ads...
*4. Ad-Blockers Gobble Profitability Pathway
Enter the friend of consumers; teeth-gnashing enemy of web sites: Ad-blockers.
Ad-blockers are the bane of sites that get paid for each click a PC user makes on an ad - often accidentally. The ad-blockers are becoming more popular among mobile device users. This is a big worry since more and more people are closing their desktop computers and picking up their phones to check Facebook, Twitter and other sites.
Already eMarketer predicts 26% of internet users in the U.S. will use ad blocking software this year... a striking 34% year-over-year jump.
But what is possibly more concerning is that now about 8% of ad blockers are used on mobile devices, according to the Reuters Digital News Report 2016.
That suggests there's plenty of room for ad blocker growth among mobile users.
And Reuters adds: "around a third of respondents say they plan to install one on their mobile in the next year."
Researchers found the vast majority who have downloaded a blocker use them regularly, indicating that once downloaded "people rarely go back."
Another report found that about 419 million smartphone users worldwide are blocking ads - far more than the nearly 200 million people who used ad blockers on desktops the year before.
This is terrible news for companies like Everyday Health. Ad blockers are shoving the door shut just as content providers thought they saw a beacon of light in mobile.
This development couldn't have come at a worse time for WebMD and peers ...
*5. WebMD Foretells EVDY Drop
A slave to Google, WebMD has watched users drop, setting off a bomb slowly reverberating through the industry.
And we've found the drop is even worse than most realize.
WebMD's then-CEO David Schlanger said during the second quarter earnings call on August 8 that users dropped 6% year over year ... and organic searches had fallen.
"During the second quarter, approximately 58% of our US consumer page views were from organic search referrals primarily from Google. This compares to approximately 71% in the prior-year period. The remaining 42% of our US consumer page views are generated through direct traffic to our sites, newsletter outreach and referrals from social platforms."
But the real drop in organic traffic appears to be 22.7%, according to our calculations.
(Our calculations: Base year split of 71% from Google, 29% from other … Following year, Google traffic dropped by “x” percent; other increased by 37% … Google traffic = 0.71-x …. Other traffic = 0.29*1.37 …. So total traffic = 0.29*1.37 + (0.71-x) … Then we have (0.71-x) / (0.29*1.37) + (0.71-x) = 0.58 … X = 16.13% … So Google traffic dropped from 71% to 54.87% … a drop of about 22.7%)
The user drop-off was very hard to take, even though profits had actually risen. Market confidence crumbled away.
WebMD's stock had already dropped 16% over three months and the shares just continued falling:
CEO Schlanger left WebMD about September 19 under "mutual agreement."
The industry leader is in a lot of pain under Google's changes and we can expect even more for Everyday. After all, its valuation is just $268 million versus WebMD's $1.9 billion.
Everyday Health faces growing complications -- big industry changes, Google’s new symptom search partnership with Mayo and Harvard that's pushing out content providers, poor mobile app downloads, increasing consumer interest in ad revenue-killing ad-blockers, and WebMD's issues that may foretell Everyday's direction.
But before management will be able to begin futile resuscitation efforts, we expect the stock to swoon to $3.50 per share.
Important Disclosure: The owners of TheStreetSweeper hold a short position in EVDY and stand to profit on any future declines in the stock price.
- Editor's Note: As a matter of policy, TheStreetSweeper prohibits members of its editorial team from taking financial positions in the companies that they cover. To contact Sonya Colberg, the author of this story, please send an email to email@example.com.